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CMA Foundation · Fundamentals of Financial and Cost Accounting · Cash Book, Bank Book, Petty Cash Book, Bank Reconciliation Statement

Ramesh Traders pays Suresh Rs 9,800 by cheque in full settlement of Rs 10,000 owed. How is this recorded in the three-column cash book?

The payment of Rs 9,800 is entered on the credit side in the bank column, and the Rs 200 discount received is entered in the discount column on the credit side too. Discount received is a gain and always sits on the credit side of the cash book.

  1. ABank column credit Rs 9,800 and discount column credit Rs 200Correct
  2. BBank column credit Rs 10,000 and discount column debit Rs 200
  3. CBank column debit Rs 9,800 and discount column debit Rs 200
  4. DBank column credit Rs 9,800 and discount column debit Rs 200

Explanation

Payment is a credit to the bank column for Rs 9,800. The Rs 200 is discount received, shown in the discount column on the credit side. Option D wrongly places it on the debit side, which is for discount allowed.

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